1. Marketing Strategy and the Marketing Environment

2. Strategic Planning
Strategic planning involves adapting the firm to take advantage of opportunities in its constantly changing environment.
Strategic planning helps a firm to maintain a strategic fit between its goals and capabilities and its changing marketing opportunities.
Every company should find the game plan for long-run survival and growth that makes the most sense given its specific situation, opportunities, objectives, and resources. This is the focus of strategic planning. It refers to the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.
Strategic planning sets the stage for the rest of planning in the firm. Companies prepare annual plans, long-range plans, and strategic plans. The annual and long-range plans deal with the company’s current businesses and how to keep them going. In contrast, the strategic plan involves adapting the firm to take advantage of opportunities in its constantly changing environment.

3. Steps in Strategic Planning
This figure illustrates the steps in strategic planning. At the corporate level, the company starts the strategic planning process by defining its overall purpose and mission. The mission is turned into detailed supporting objectives that guide the entire company. Then, headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one. In turn, each business and product develops detailed marketing and other departmental plans that support the company-wide plan. Thus, marketing planning occurs at the business-unit, product, and market levels. It supports company strategic planning with more detailed plans for specific marketing opportunities.
Company-wide strategic planning guides marketing strategy and planning. Like the marketing strategy, the broader company strategy must be customer focused.

4. Mission Statement Statement of the organization’s purpose
What it wants to accomplish in the larger environment
Market oriented and defined in terms of satisfying basic customer needs
Emphasizes the company’s strengths
Focuses on customers and the customer experience the company seeks to create
A mission statement refers to the organization’s purpose. What it wants to accomplish in the larger environment. Forging a sound mission begins with the following questions: What is our business? Who is the customer? What do consumers value? What should our business be? Successful companies continuously raise these questions and answer them carefully and completely. Mission statements should be market oriented and defined in terms of satisfying basic customer needs.
Mission statements should be meaningful and specific yet motivating. They should emphasize the company’s strengths and tell forcefully how it intends to win in the marketplace. For example, Google’s mission is to give people a window into the world’s information, wherever it might be found. Finally, a company’s mission should focus on customers and the customer experience the company seeks to create.

6. Setting Company Objectives and Goals
The mission should be converted to supporting objectives at each level of management.
The mission leads to setting a hierarchy of objectives.
Business objectives
Marketing objectives
A company needs to turn its mission into detailed supporting objectives for each level of management. Each manager should have objectives and be responsible for reaching them. A broad mission leads to a hierarchy of objectives, including business objectives and marketing objectives. Marketing strategies and programs must be developed to support marketing objectives. For example, Heinz’s overall objective is to build profitable customer relationships by developing foods “superior in quality, taste, nutrition, and convenience” that embrace its nutrition and wellness mission.

7. Defining the Business Who is being satisfied? Customer groups
What is being
satisfied?
Customer needs
Definition
of Business
How are
customer needs
being satisfied?
Distinctive
Competencies

8. UC Berkeley vs. Stanford U.

9. Business Portfolio
Collection of businesses and products that make up the company
Steps in business portfolio planning:
Analyze the firm’s current business portfolio
Develop strategies for growth and downsizing to shape the future portfolio
A business portfolio is a collection of businesses and products that make up the company. The best business portfolio is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.
Business portfolio planning involves two steps. First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.

10. Portfolio Analysis
Evaluation of the products and businesses that make up the company by the management
Steps:
Identifying the strategic business units (SBUs)
Assessing the attractiveness of its various SBUs and deciding the support each SBU deserves
The purpose is to direct resources toward more profitable businesses while phasing out or dropping weaker ones.
The major activity in strategic planning is business portfolio analysis, which is the process by which management evaluates the products and businesses that make up the company.
There are two steps for analyzing portfolios. Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division, or sometimes a single product or brand. The company next assesses the attractiveness of its various SBUs and decides how much support each deserves.
The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. For this reason, most standard portfolio analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.

11. LVMH - Business Groups and Brands
Wines & Spirits
Moët & Chandon Hennessy Newton
Dom Pérignon Veuve Clicquot cane
Krug Belvedere Mercier
Cheval des Andes Cloudy Bay Chopin
Terrazas de los Andes Château d’Yquem Ruinart
Cape Mentelle Bodegas Chandon
The Glenmorangie Company 　Domaine Chandon California
Domaine Chandon Australia
Fashion &
Leather Goods
Louis Vuitton Givenchy Thomas Pink
Loewe Marc Jacobs Donna Karan
Celine Fendi eLUXURY
Kenzo Berluti StefanoBi
Emilio Pucci
Perfumes &
Cosmetics
Parfums Christian Dior Kenzo Parfums Fresh
Guerlain La Brosse et Dupont Make Up For Ever
Parfums Givenchy Benefit Cosmetics Acqua di Parma
Perfumes Loewe
Watches &
Jewelry
TAG Heuer Dior Watches FRED
Zenith Chaumet De Beers LV
Selective Retailing
DFS Miami Cruiseline Services
Sephora sephora.com
Le Bon Marché Semaritaine
Other Activities
D.I group Connaissance des Arts

12. The BCG Growth-Share Matrix
The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm.
This figure shows the classification of company’s SBUs. Market growth rate provides a measure of market attractiveness. Relative market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBUs. Stars are high-growth, high-share businesses or products. The second type, cash cows, are low-growth, high-share businesses or products. The third type, question marks, are low-share business units in high-growth markets. Dogs are low-growth, low-share businesses and products.
The 10 circles in the growth-share matrix represent the company’s 10 current SBUs.

13. Growth-Share Matrix
Evaluates a company’s SBUs in terms of market growth rate and relative market share
Problems
Difficult, time consuming, and costly to implement
Difficult to define SBUs and measure market share and growth
Focuses on classifying current businesses but provide little advice for future planning
The growth-share matrix is a portfolio-planning method that evaluates a company’s SBUs in terms of market growth rate and relative market share. SBUs change their positions in the growth-share matrix. Many SBUs start out as question marks and move into the star category if they succeed. They later become cash cows as market growth falls, and then finally die off or turn into dogs toward the end of the life cycle.
There are limitations for the BCG approach. They can be difficult, time consuming, and costly to implement. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on classifying current businesses but provide little advice for future planning.

14. The Product/Market Expansion Grid
The product/market expansion grid refers to a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.
Companies must first consider if they can achieve deeper market penetration, that is, make more sales to current customers without changing the original products. Secondly, companies must consider possibilities for market development. This refers to identifying and developing new markets for its current products. Third, companies could consider product development by offering modified or new products to current markets. Finally, companies might consider diversification, which refers to starting up or buying businesses beyond the firm’s current products and markets.

15. Downsizing
Reduces the business portfolio by eliminating products or business units that are not profitable or that no longer fit the company’s overall strategy
Reasons for downsizing:
Rapid growth of the company
Lack of experience in a market
Change in market environment
Decline of a particular product
Companies must not only develop strategies for growing their business portfolios but also strategies for downsizing them. When a firm finds brands or businesses that are unprofitable or that no longer fit its overall strategy, it must carefully prune, harvest, or divest them.
There are many reasons that a firm might want to abandon products or markets. The firm may have grown too fast or entered areas where it lacks experience. The market environment might change, making some products or markets less profitable. For example, in difficult economic times, many firms prune out weaker, less-profitable products and markets to focus their more limited resources on the strongest ones. Finally, some products or business units simply age and die.

16. Role of Marketing in Strategic Planning
Provides a guiding philosophy
Marketing concept—company strategy should create customer value and build profitable relationships with the key customers
Provides inputs to strategic planners
Helps identify market opportunities and assess the firm’s potential to take advantage of them
Designs strategies for reaching the unit’s objectives
Marketing plays a key role in the company’s strategic planning in several ways. First, marketing provides a guiding philosophy. The marketing concept suggests the company strategy should revolve around creating customer value and building profitable relationships with important consumer groups. Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and assessing the firm’s potential to take advantage of them. Finally, within individual business units, marketing designs strategies for reaching the unit’s objectives.

17. Partnering with Other Company Departments
Value chain: Series of internal departments that carry out value-creating activities
Firm’s success depends on how well the various departments coordinate their activities.
Marketers should ensure all the departments are customer-focused and develop a smooth functioning value chain.
Each company department can be thought of as a link in the company’s internal value chain. That is, each department carries out value-creating activities to design, produce, market, deliver, and support the firm’s products. The firm’s success depends not only on how well each department performs its work but also on how well the various departments coordinate their activities. For example, Walmart’s ability to help “Save Money. Live Better.” depends on the purchasing department’s skill in developing the needed suppliers and buying from them at low cost. Walmart’s information technology department must provide fast and accurate information about which products are selling in each store. And its operations people must provide effective, low-cost merchandise handling. Ideally, then, a company’s different functions should work in harmony to produce value for consumers.
Marketers should also ensure all the departments are customer-focused and develop a smooth functioning value chain. Whether you’re an accountant, an operations manager, a financial analyst, an IT specialist, or a human resources manager, you need to understand marketing and your role in creating customer value.

18. Partnering with Others in the Marketing System
Companies should assess:
Their internal value chains.
The value chains of their suppliers, distributors, and their customers.
Value delivery network: Made up of the company, its suppliers, its distributors, and its customers who partner with each other
To improve the performance of the entire system
To create customer value, the firm needs to look beyond its own internal value chain and into the value chains of its suppliers, distributors, and, ultimately, its customers.
Companies are partnering with other members of the supply chain to improve the performance of the customer value delivery network. The customer value delivery networks is the network made up of the company, its suppliers, its distributors, and, ultimately, its customers who partner with each other to improve the performance of the entire system. Competition takes place between the entire value delivery networks created by these competitors. For example, Toyota’s performance against Ford depends on the quality of Toyota’s overall value delivery network versus Ford’s. Even if Toyota makes the best cars, it might lose in the marketplace if Ford’s dealer network provides more customer-satisfying sales and service.

19. Marketing Strategy
Marketing logic by which the company hopes to create customer value and achieve profitable customer relationships
Marketing mix: Integration of product, price, place, and promotion
Activities for best marketing strategy and mix involve:
Marketing analysis
Planning, implementation, and control
The strategic plan defines the company’s overall mission and objectives. Thus, marketing strategy refers to the marketing logic by which the company hopes to create customer value and achieve profitable customer relationships.
Guided by marketing strategy, the company designs an integrated marketing mix made up of factors under its control which are product, price, place, and promotion. To find the best marketing strategy and mix, the company engages in marketing analysis, planning, implementation, and control. Through these activities, the company watches and adapts to the factors and forces in the marketing environment.

20. Market Segmentation and Market Targeting
Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs
Market segment
Group of consumers who respond in a similar way to a given set of marketing efforts
Market targeting
Evaluating each market segment’s attractiveness and selecting one or more segments to enter
Market segmentation refers to dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs.
A market segment is a group of consumers who respond in a similar way to a given set of marketing efforts. In the car market, for example, consumers who want the biggest, most comfortable car regardless of price make up one market segment. Consumers who care mainly about price and operating economy make up another segment.
Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

21. Positioning
Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers
Begins with differentiation
Differentiation: Differentiating the market offering to create superior customer value
The entire marketing program should support the chosen positioning strategy.
After a company has decided which market segments to enter, it must determine how to differentiate its market offering for each targeted segment and what positions it wants to occupy in those segments. Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. For example, the 100 year old Del Monte brand designed its entire integrated marketing campaign around the “Bursting with Life” positioning. More than just words, the campaign slogan positions Del Monte’s canned fruits and vegetables as quality ingredients that contribute to a healthy lifestyle.
Effective positioning begins with differentiation. This refers to actually differentiating the market offering to create superior customer value. Once the company has chosen a desired position, it must take strong steps to deliver and communicate that position to target consumers. The company’s entire marketing program should support the chosen positioning strategy.

22. Market Differentiation and Positioning
Burt’s Bees offers “Earth friendly natural personal care products for The Greater Good”, a deceptively simple statement that forms the backbone of its marketing strategy

23. The Four Ps of the Marketing Mix
The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market. This figure shows the marketing tools under each P.
The first tool is product, which refers to the goods-and-services combination the company offers to the target market.
The second tool is price, which is the amount of money customers must pay to obtain the product.
Place includes the company activities that make the product available to target consumers.
The fourth tool is promotion, which refers to activities that communicate the merits of the product and persuade target customers to buy it.
An effective marketing program blends the marketing mix elements into an integrated marketing program designed to achieve the company’s marketing objectives by delivering value to consumers.

24. Criticisms of the Four Ps
Omit or underemphasize service products
Need to include packaging as a product decision
Does not cater to the buyer’s perspective of the four Cs:
Customer solution
Customer cost
Convenience
Communication
Some critics think that the four Ps may omit or underemphasize certain important activities. These include services like banking, airline, and retailing services which fall under category of products. These are known as service products. Another criticism includes the need for packaging to be included in the four Ps as it is considered one of the many product decisions.
The main criticism is that the four Ps emphasize only the seller’s viewpoint. Hence, to cater to the buyer’s viewpoint in this age of customer value and relationships, the four Ps might be better described as the four Cs. These include customer solution, customer cost, convenience, and communication.

25. Managing Marketing: Analysis, Planning, Implementation, and Control
Managing the marketing process requires the four marketing management functions as illustrated in this figure. They include analysis, planning, implementation, and control.
The company first develops company-wide strategic plans and then translates them into marketing and other plans for each division, product, and brand. Through implementation, the company turns the plans into actions. Control consists of measuring and evaluating the results of marketing activities and taking corrective action where needed. Finally, marketing analysis provides the information and evaluations needed for all the other marketing activities.

26. SWOT Analysis: Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T)
Managing the marketing function begins with a complete analysis of the company’s situation. The marketer should conduct a SWOT analysis. This refers to an overall evaluation of the company’s strengths (S), weaknesses (W), opportunities (O), and threats (T).
Strengths include internal capabilities, resources, and positive situational factors that may help the company serve its customers and achieve its objectives. Weaknesses include internal limitations and negative situational factors that may interfere with the company’s performance. Opportunities are favorable factors or trends in the external environment that the company may be able to exploit to its advantage. And threats are unfavorable external factors or trends that may present challenges to performance.

27. Contents of a Marketing Plan
Section
Purpose
Executive summary
Brief summary of the main goals and recommendations
Current marketing situation
Gives the market description and the product, competition, and distribution review
Threats and opportunities analysis
Helps management to anticipate important positive or negative developments
Objectives and issues
States and discusses marketing objectives and key issues
Marketing planning involves choosing marketing strategies that will help the company attain its overall strategic objectives. The plan begins with an executive summary that quickly reviews major assessments, goals, and recommendations. The main section of the plan presents a detailed SWOT analysis of the current marketing situation as well as potential threats and opportunities. The plan next states major objectives for the brand and outlines the specifics of a marketing strategy for achieving them.

28. Contents of a Marketing Plan
Section
Purpose
Marketing strategy
Outlines the broad marketing logic and the specifics of target markets, positioning, marketing expenditure levels, and strategies for each marketing mix element
Action programs
Spells out how marketing strategies will be turned into specific action programs
Budgets
Details a supporting marketing budget that is a projected profit-and-loss statement
Controls
Outlines the controls that will be used to monitor progress, allow management to review implementation
results, and spot products that are not meeting their goals
A marketing strategy consists of specific strategies for target markets, positioning, the marketing mix, and marketing expenditure levels. It outlines how the company intends to create value for target customers in order to capture value in return. In this section, the planner explains how each strategy responds to the threats, opportunities, and critical issues spelled out earlier in the plan. Additional sections of the marketing plan lay out an action program for implementing the marketing strategy along with the details of a supporting marketing budget. The last section outlines the controls that will be used to monitor progress, measure return on marketing investment, and take corrective action.

29. Market Implementation
Turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives
Addresses the who, where, when, and how of the marketing activities
Marketing implementation is the process of turning marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. Whereas marketing planning addresses the what and why of marketing activities, implementation addresses the who, where, when, and how.

30. Marketing Department Organization
Functional organization
Geographic organization
Product management organization
Market or customer organization
Combination organization
The company must design a marketing organization that can carry out marketing strategies and plans.
Modern marketing departments can be arranged in several ways. The most common form of marketing organization is the functional organization. Under this organization, different marketing activities are headed by a functional specialist.
A company that sells across the country or internationally often uses a geographic organization. Its sales and marketing people are assigned to specific countries, regions, and districts.
A company with different products or brands may create a product management organization. Under this approach, a product manager develops and implements a complete strategy and marketing program for a specific product or brand.
A market or customer management organization approach is best suited for companies that sell one product line to many different types of markets and customers who have different needs and preferences.
Large companies that produce different products flowing into many different geographic and customer markets employ a combination of the functional, geographic, product, and market organization forms.

31. Marketing Control
Measuring and evaluating the results of marketing strategies and plans
Operating control ensures that the company achieves the sales, profits, and other goals set out in its annual plan.
Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities.
Marketing control refers to measuring and evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are achieved. This may require changing the action programs or even changing the goals.
Operating control ensures that the company achieves the sales, profits, and other goals set out in its annual plan. It also involves determining the profitability of different products, territories, markets, and channels.
Strategic control involves looking at whether the company’s basic strategies are well matched to its opportunities.

32. Marketing Return on Investment (ROI)
Net return from a marketing investment divided by the costs of the marketing investment
Assessed using:
Standard marketing performance measures
Customer-centered measures
Marketing return on investment or marketing ROI is the net return from a marketing investment divided by the costs of the marketing investment. It measures the profits generated by investments in marketing activities.
Companies can assess marketing ROI in terms of standard marketing performance measures, such as brand awareness, sales, or market share. Such measures can be assembled through marketing dashboards, which are sets of marketing performance measures in a single display used to monitor strategic marketing performance.
Increasingly, marketers also use customer-centered measures of marketing impact, such as customer acquisition, customer engagement, customer retention, customer lifetime value, and customer equity. These measures capture not only current marketing performance but also future performance resulting from stronger customer relationships.

33. Marketing Return on Investment
This figure views marketing expenditures as investments that produce returns in the form of more profitable customer relationships. Marketing investments result in improved customer value and satisfaction, which in turn increases customer attraction and retention. This increases individual customer lifetime values and the firm’s overall customer equity. Increased customer equity, in relation to the cost of the marketing investments, determines return on marketing investment.
Source: Adapted from Roland T. Rust, Katherine N. Lemon, and Valerie A. Zeithaml, “Return on Marketing: Using Consumer Equity to Focus Marketing Strategy,” Journal of Marketing, January 2004, p Used with permission.

34. Marketing Environment
Outside forces that affect marketing management’s ability to build and maintain successful relationships with target customers
Microenvironment: Actors close to the company that affect its ability to serve its customers
Macroenvironment: Larger societal forces that affect the microenvironment
Marketing environment refers to the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. The marketing environment consists of a microenvironment and a macroenvironment.
The microenvironment consists of the actors close to the company that affect its ability to serve its customers.
The macroenvironment consists of the larger societal forces that affect the microenvironment.

35. Actors in the Microenvironment
This figure shows the major actors in the marketer’s microenvironment.
In designing marketing plans, marketing management takes other company groups into account.
Suppliers provide the resources needed by the company to produce its goods and services. Supplier problems can seriously affect marketing.
Marketing intermediaries help the company promote, sell, and distribute its products to final buyers. They include resellers, physical distribution firms, marketing services agencies, and financial intermediaries.
Marketers must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers.
A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. These include financial, media, government, citizen-action, local publics, general, and internal publics.
Customers are the most important actors in the company’s microenvironment. Customers include consumer markets, business markets, reseller markets, and international markets.

36. The Microenvironment – The Company
Other company groups must be considered when designing marketing plans
Marketing decisions are made within the broader strategies made by top management
All departments share responsibility for understanding customer needs and creating value
Note to Instructor: Marketing managers must work closely with other company departments. With marketing taking the lead, all departments—from manufacturing and finance to legal and human resources—share the responsibility for understanding customer needs and creating customer value.

37. The Microenvironment - Suppliers
Provide resources needed to produce goods and services
Note to Instructor: Suppliers form an important link in the company’s overall customer value delivery network. They provide the resources needed by the company to produce its goods and services. Supplier problems can seriously affect marketing. Marketing managers must watch supply availability and costs. Supply shortages or delays, labor strikes, natural disasters, and other events can cost sales in the short run and damage customer satisfaction in the long run. Rising supply costs may force price increases that can harm the company’s sales volume.
L’Oréal builds long-term supplier relationships based on mutual benefit and growth

38. The Microenvironment – Marketing Intermediaries
Firms that help the company promote, sell, and distribute its goods to final buyers
Resellers
Physical distribution firms
Marketing services agencies
Financial intermediaries
Note to Instructor: Marketing intermediaries help the company promote, sell, and distribute its products to final buyers. They include resellers, physical distribution firms, marketing services agencies, and financial intermediaries. Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers who buy and resell merchandise. Physical distribution firms help the company stock and move goods from their points of origin to their destinations. Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets. Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

39. The Microenvironment - Competitors
A company must provide greater customer value and satisfaction than its competitors do
The company must position its offerings strongly against competitors’ offerings in the minds of consumers
Note to Instructor: The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt to the needs of target consumers. They also must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. Ask the students to discuss how different brands of a particular type of product are positioned in the minds of customers.

40. The Microenvironment - Publics
Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives
Financial publics
Media publics
Government publics
Citizen-action publics
Local publics
General public
Internal publics
Note to Instructor: Discuss the many reasons why companies require the support of publics besides its customers.

41. The Microenvironment - Publics
Recognizing the importance of community publics, P&G’s Tide Loads of Hope program washes, dries, and folds loads of clothes for families struck by local disasters

42. The Microenvironment - Customers
Consumer markets
Buy for personal consumption
Business markets
Buy for use in production processes
Reseller markets
Buy to resell at a profit
Government markets
Buy for public purposes
International markets
Buyers in other countries
Note to Instructor: Customers are the most important actors in the company’s microenvironment. The aim of the entire value delivery network is to serve target customers and create strong relationships with them. Discuss the various types of markets and explain how a company’s marketing message for a single product may vary across the different types of markets.

43. Major Forces in the Company’s Macroenvironment
This figure shows the six major forces in the company’s macroenvironment.
Each of these forces are discussed in greater detail in the following slides.

44. Demographic Environment
Demography: Study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics
Marketers analyze:
Changing age and family structures
Geographic population shifts
Educational characteristics
Population diversity
Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. Marketers analyze several important factors that affect the marketing environment.
The first factor is the changing age and family structures. The U.S. population contains several generational groups. These include the baby boomers, Generation X, Generation Y or Millennials, and Generation Z.
The second factor is the changing American household. More people are divorcing or separating, choosing not to marry, marrying later, or marrying without intending to have children. Marketers must increasingly consider the special needs of nontraditional households because they are now growing more rapidly than traditional households. Each group has distinctive needs and buying habits.
The third factor is geographic shifts in population. Population shifts interest marketers because people in different regions buy differently. For example, people in the Midwest buy more winter clothing than people in the Southeast.
And the final factor is increasing diversity. Marketers face increasingly diverse markets as their operations become more international in scope. Some major companies also explicitly target gay and lesbian consumers.

45. Baby Boomers 78 million people born between 1946 and 1964
Wealthiest generation in history
Account for 50% of consumer spending
Hold ¾ of the nation’s financial assets
Recession hit baby boomers hard, eating into savings and retirement prospects
Represent strong targets for financial services
Note to Instructor: Today’s baby boomers account for about 25 percent of the U.S. population but control an estimated 80 percent of the nation’s personal wealth. The 50-plus consumer segment now accounts for nearly half of all discretionary consumer spending. As they reach their peak earning and spending years, the boomers will continue to constitute a lucrative market for financial services, new housing and home remodeling, new cars, travel and entertainment, eating out, health and fitness products, and just about everything else. It would be a mistake to think of the older boomers as phasing out or slowing down. Today’s boomers think young no matter how old they are. One study showed that boomers, on average, see themselves 12 years younger than they actually are. And rather than viewing themselves as phasing out, they see themselves as entering new life phases.

46. Generation X 49 million, born from 1965 to 1976
Most educated generation to date
Less materialistic than other groups
Skeptical of marketing
Careful spenders
Note to Instructor: The Generation Xers are a sometimes overlooked consumer group. Although they seek success, they are less materialistic than the other groups; they prize experience, not acquisition. For many of the Gen Xers who are parents, family comes first—both children and their aging parents—and career second. From a marketing standpoint, the Gen Xers are a more skeptical bunch. They tend to research products before they consider a purchase, prefer quality to quantity, and tend to be less receptive to overt marketing pitches. They are increasingly displacing the lifestyles, culture, and values of the baby boomers. They are moving up in their careers, and many are proud homeowners with young, growing families. They are the most educated generation to date, and they possess hefty annual purchasing power.
Virginia tourism now aims its well-known “Virginia is for Lovers” campaign at Gen Xer families, who want new experiences close to home

47. Millennials 83 million, born between 1977 and 2000
$733 billion in purchasing power
Ethnically diverse
Fluent with digital technology
Personalization and product customization are key to marketing success
Note to Instructor: One thing that all Millennials have in common is their utter fluency and comfort with digital technology. They don’t just embrace technology; it’s a way of life. The Millennials were the first generation to grow up in a world filled with computers, mobile phones, satellite TV, iPods and iPads, and online social networks. As a result, they engage with brands in an entirely new way, such as with mobile or social media.

48. The Changing American Family
Traditional households in decline
Married couples with children = 23%
Non-traditional households are growing
Married without children = 29%
Single parents = 17%
Non-family households = 32%
More working women and stay-at-home dads
Note to Instructor: Ask students to think of products or services that target non-traditional families.

49. Geographic Shifts in Population
About 15 percent of U.S. residents move each year
Population shift toward the Sunbelt states
Midwest and Northeast losing population
People moving to suburbs and micropolitan areas
Increasing numbers of telecommuters
Booming SOHO market
Note to Instructor: Population shifts interest marketers because people in different regions buy differently. For example, people in the Midwest buy more winter clothing than people in the Southeast.

50. The Sunbelt States

51. Geographic Shifts in Population
Note to Instructor: The shift in where people live has also caused a shift in where they work. For example, the migration toward micropolitan and suburban areas has resulted in a rapid increase in the number of people who telecommute—work at home or in a remote office and conduct their business by phone or the Internet. This trend, in turn, has created a booming SOHO (small office/home office) market.
Cisco targets the growing telecommuter market with WebEx, which lets people meet and collaborate online, no matter what their work location

52. A More White-Collar Population
U.S. population becoming better educated
Workforce becoming more white-collar
Job growth strongest for professional workers and weakest for manufacturing workers
Number of professional workers expected to increase

53. Increasing Diversity
Ethnic groups have mixed together but maintained diversity by retaining cultural differences
An attractive diversity segment for marketers is the 54 million U.S. adults with disabilities
Many major companies also explicitly target gay and lesbian consumers
Marketers design products, ads, and promotions for different groups
Note to Instructor: Most large companies, from P&G, Walmart, Allstate, and Bank of America to Levi Strauss and Harley-Davidson, now target specially designed products, ads, and promotions to one or more different ethnic or cultural groups.

54. Economic Environment
Economic factors that affect consumer purchasing power and spending patterns:
Industrial economies
Subsistence economies
Developing economies
Changes in consumer spending
Differences in income distribution
The economic environment consists of economic factors that affect consumer purchasing power and spending patterns.
Nations vary greatly in their levels and distribution of income. Some countries have industrial economies, which constitute rich markets for many different kinds of goods. Some other countries have subsistence economies, where they consume most of their own agricultural and industrial output and offer few market opportunities. In between are developing economies that can offer outstanding marketing opportunities for the right kinds of products.
Economic factors can have a dramatic effect on consumer spending and buying behavior. Value marketing has become the slogan for many marketers. Marketers in all industries are looking for ways to offer today’s frugal buyers greater value.
This distribution of income has created a tiered market. Many companies aggressively target the affluent, while other firms target those with more modest means. Still other companies tailor their marketing offers across a range of markets, from the affluent to the less affluent.

55. Natural Environment
Physical environment and natural resources needed as inputs by marketers or affected by marketing activities
Environmental sustainability concerns have grown steadily over past three decades.
Trends:
Shortages of raw materials
Increased pollution
Increased government intervention
The natural environment involves the physical environment and the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Marketers should be aware of several trends in the natural environment.
The first involves growing shortages of raw materials. Firms making products that require scarce resources face large cost increases, even if the materials remain available. The second trend is increased pollution. The third trend is increased government intervention in natural resource management. The governments of different countries vary in their concern and efforts to promote a clean environment.
Today enlightened companies adopt practices that support environmental sustainability. This refers to the effort to create a world economy that the planet can support indefinitely.

56. Technological Environment
New technologies create new markets and opportunities.
Radio-frequency identification (RFID) is technology to track products through various points in the distribution channel.
Government agencies investigate and ban potentially unsafe products.
New technologies can offer exciting opportunities for marketers. Many firms use radio-frequency identification or RFID technology to track products through various points in the distribution channel. New technologies create new markets and opportunities. Companies that do not keep up will soon find their products outdated.
Government agencies investigate and ban potentially unsafe products. Regulations have resulted in much higher research costs and longer times between new product ideas and their introduction. Marketers should be aware of these regulations when applying new technologies and developing new products.

57. Political Environment
Forces that influence and limit various organizations and individuals in a society
Laws, government agencies, and pressure groups
Goals of enacting business legislation:
Protect companies from each other
Protect consumers from unfair business practices
Protect the interests of society against unrestrained business behavior
The political environment refers to laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.
Business legislation has been enacted for a number of reasons. The first is to protect companies from each other. The second purpose of government regulation is to protect consumers from unfair business practices. The third purpose is to protect the interests of society against unrestrained business behavior.

58. Socially Responsible Behavior
Socially responsible companies actively seek out ways to protect the long-run interests of consumers and the environment.
Companies develop policies, guidelines, and other responses to complex social responsibility issues.
Socially responsible firms actively seek out ways to protect the long-run interests of their consumers and the environment. Almost every aspect of marketing involves ethics and social responsibility issues. Companies are now developing policies, guidelines, and other responses to complex social responsibility issues.

59. Cause-Related Marketing
Used by companies to:
Exercise their social responsibility
Build more positive images
Primary form of corporate giving
Controversy—strategy for selling more than a strategy for giving
To exercise their social responsibility and build more positive images, many companies are now linking themselves to worthwhile causes. Cause-related marketing has become a primary form of corporate giving.
Critics worry that cause-related marketing is more a strategy for selling than a strategy for giving. Thus, companies using cause-related marketing might find themselves walking a fine line between increased sales and an improved image and charges of exploitation.

60. Cultural Environment
Institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors
Society shapes people’s values and beliefs.
Cultural characteristics that affect marketing decision making:
Persistence of cultural values
Shifts in secondary cultural values
The cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors. Society shapes basic beliefs and values. Cultural characteristics that can affect marketing decision making are the persistence of cultural values and shifts in secondary cultural values, such as people’s views of themselves, others, organizations, society, and nature.

61. Responding to the Marketing Environment
Reactive firms passively accept the marketing environment and do not try to change it.
Proactive firms develop strategies to change the environment.
They take aggressive actions to affect the publics and forces in their marketing environment.
Many companies view the marketing environment as an uncontrollable element to which they must react and adapt. They passively accept the marketing environment and do not try to change it.
Other companies take a proactive stance toward the marketing environment. Rather than assuming that strategic options are bounded by the current environment, these firms develop strategies to change the environment. These firms take aggressive actions to affect the publics and forces in their marketing environment.
Marketing management cannot always control environmental forces. In many cases, it must settle for simply watching and reacting to the environment. For example, a company would have little success trying to influence geographic population shifts, the economic environment, or major cultural values. But whenever possible, smart marketing managers take a proactive rather than reactive approach to the marketing environment.